Expanding Horizon: Rethinking Auckland’s Port Plan

Far-reaching plans

In my last blog I suggested that it’s time for a rethink of Ports of Auckland Ltd’s (POAL) plans for expansion. The current plan cements in a commitment to a critical downtown location by continuing to promote stepped investment, including substantial further reclamation.  The analysis of demand behind the plan seems too slight in content and too inflated in expectations to justify this costly long term commitment and the prospect of a four-fold increase in port related rail and road traffic. 

Today

 Source: Port Development Plan, Ports of Auckland Ltd, 2008

Tomorrow?

Source: Port Development Concept Plan, Ports of Auckland Ltd, 2008

Debatable assumptions

We are facing a period of unprecedented post-war change to the economies of New Zealand and our trading partners.  Who knows what the configuration of goods crossing our ports will be in 20, 30, or 40 years’ time?  Or the sorts of demands that might be made on some of the city’s most valuable real estate - currently occupied by a transport operator?   Obviously an efficient port is critical to New Zealand’s trading future, but that might just be why it is also important to consider radical alternatives: to achieve the efficiencies and flexibility that uncertain and challenging times demand.

This post provides a few more numbers to suggest why the POAL view of the future may be a little narrow .  It also proposes an alternative – no doubt just one of several that might be considered to promote the evolution of the nation’s long-term trade.

Changing production patterns erode Auckland’s primacy

New Zealand cargo figures from 1989 to 2011 (sourced from Statistics New Zealand 1) reveal interesting shifts. First, growth in cargo handled was slower at Auckland's port than elsewhere:

% Growth in Cargo, 1989-2011

That means its share of national trade has fallen.  I saw no analysis of the reasons for this in the port plan.  

Auckland Port’s Share of National Cargo, 1989 and 2011

In fact, if we think about it, its not  necessarily bad news.  For a start, Auckland’s sea trade is of a higher  value than elsewhere; between 1989 and 2011the unit value of its exports grew by 29% (in nominal dollars) compared with just 8% elsewhere, to reach $3,800/tonne (compared with $1,300/tonne). A  regional focus on higher value exports was reinforced  by the growing freight role of the Auckland International Airport which today accounts for 12% of New Zealand exports by value, and 21% of imports.

Also, Auckland seaport still takes a large share of national  imports reflecting the region's twin roles as centre of consumption in New Zealand and as a trans-shipment point for imports to other parts of the country.

Nevertheless, if more trade is being channeled elsewhere it suggests that there may be other options for growth which are less likely to adversely impact on Auckland's valued harbourside.

Looking to the wider region

Take a look at what is happening elsewhere in the northern North Island.  The ports at Tauranga and Whangarei have grown faster than Auckland, and today jointly account for a larger share of exports by value and tonnage.  Whangarei is, of course, a special case given the role of shipments to the oil refinery.

           Growth, 1989-2011                                                       Share of New Zealand, 2011

Responding to structural change?
These figures hint at an emerging specialisation.  Over the past thirty years, the primary processing industries on which Auckland’s export trade was built have moved out.  Consequently, the downtown port is a bit of an anomaly.  The migration of export trade to Tauranga simply reflects an adjustment in traffic to the changing geography of production.  As higher fuel prices bite, and the overheads of overloading Auckland's transport system increase, there may be good reason to act to sustain that trend.


Manufacturing has changed, too. The import-substitution industry which grew so strongly in Auckland between the 1940s and 1970s has been dismantled by a lowering of trade barriers and by the impact of the new manufacturing culture of North and Southeast Asia.

Today Auckland has a smaller number of specialised, hopefully more sustainable manufacturers.  Some of these do, however, rely for expansion on efficient channels to international markets.  Its is incumbent on the POAL to make sure it responds to their hopefully growing needs.

Is more specialisation an answer?

Of course, our analysis needs to delve deeper before we can be confident about the possible effects of ongoing structural change on the composition and volume of future trade.  But even the crude figures here suggest that there is an opportunity for greater specialisation and consequently more intensive and productive use of the assets of the three northern ports. 

For a start, a strong focus on value-based trade through Auckland seaport would enable the company to do more with less.  At the same time, fully exploiting its inland port sites as consolidation and break-down points for these and other more traditional trades should ensure that they too play a full role in integrating and streamlining internal and international transport.

Tauranga has boomed as a result of a booming rural sector – both by importing inputs and exporting products.  As a gateway to New Zealand’s most productive hinterland – the Waikato, Bay of Plenty and central North Island – we can expect this role to grow.  And if New Zealand’s trade future really is just “more of the same” as implied by the exponential growth on which the POAL port plan is based, then Tauranga  is an  obvious choice for  investing in the capacity to service the primary sectors and associated processing industries as these sectors expand, diversify, and intensify their output.

Whangarei’s long-term role is more speculative, but it possesses an underutilised port which can readily adopt and develop best practice commodity handling, as it has done for forestry.  There may also be real value in shifting lower value and bulk trades from Auckland’s downtown to Whangarei’s Northport as a means of extracting the greatest value out of both.  

Beyond the horizon: the logic behind Northport

Playing to and building on port specialisations would exploit existing investment in inland port operations and boost the productivity of any new investment across the entire transport chain.  It would probably require the rail link between Auckland and Whangarei to be upgraded and the Oakleigh extension to Northport at Marsden Point to be built.  This can probably be justified  anyway for the additional capacity it will provide on the  highway between Auckland and Whangarei by removing bulk traffic.  And by providing a sound alternative to  Auckland for high volume, low value trade  it will avoid  costly reclamation there, and help sustain the quality of Auckland's waterfront. 

The potential development of a new nearby Marsden City and the solid industrial base associated with the oil refinery mean that more trade and investment at Northport could play  a major role to play in  freeing some of Auckland's  harbour edge  for higher value uses.

Radical change calls for lateral thinking, and integrated action
This is just one option.  But looking at it – and others -  seriously might begin to meet former POAL board member Rob Campbell’s concerns about the narrow thinking that promotes incremental change at a legacy port as a way to cater for apparently undifferentiated volume growth - regardless of the wider costs.

Of course, any such suggestions may call for more than rethinking where and how different goods are shipped in New Zealand.  Perhaps the existing owners and operators cannot work together to extract the best out of their investment (for shippers or shareholders).  Perhaps current governance and ownership structures make that too big an ask, as suggested  by the Productivity Commission.

An important  part of the answer may lie in the emergence in New Zealand of an organisation -- or organisations -- capable of integrating and managing the flows across all modes to the advantage of individual trades, regardless of the ownership and management of individual components of the transport infrastructure. Actually, integration in response to globalisation is  not so radical, even if the notion of working together may be anathema  for some of  today's port players.

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[1]               Value measured as nominal $CIF for imports and $FOB for exports.

All at Sea – Port Plan for Auckland

Critical Infrastructure at a critical location

Ports of Auckland Ltd (POAL) operates a substantial general cargo port and container terminal on the edge of Auckland’s CBD.   It occupies a critical site adjacent to  commercial, recreational, and residential zones.  Its future development will have a major impact on the city centre by way of land use options, traffic flows, harbour and harbour-side-based recreation and tourism, and the quality of central city life.

Rob Campbell’s concerns

It was disturbing, then, to read recently resigned Board member Rob Campbell’s view of the port’s future on Bob Dey’s Property Report website, especially in light of controversies about  port operations and plans.

As I read it, Campbell is saying that corporate plans for the port are really about more of the same – a harbour edge transport operation which does little to recognise the value of the site or consider how the company might increase efficiencies and returns by greater specialisation.  He calls for radical change: incremental gains in productivity are not enough.

He argues that POAL is not pursuing the gains that might come from exploring the use of surplus or lower cost capacity elsewhere.   This would take a quantum shift in thinking, though, including a willingness to cooperate with other northern ports (Tauranga and Northland).

The sector is due for a major shakeup in New Zealand if for no other reason than the uncertainty that  substantial long term increase in fuel prices create around future trade and shipping arrangements.  Our ports have to be able to respond.  Not only  that; our economy and the economies of our trading partners are undergoing transformations which are bound to impact on trade flows in ways that are difficult to predict.

The Productivity Commission’s focus: governance issues

Against this background of uncertainty the Productivity Commission in its International Freight Services Inquiry highlighted the difficulties in port management and development arising from current governance arrangements.  Local council control confuses purpose and direction, and prejudices governance in a commercial environment through the presence and expectations of elected representatives.  

This effect has been seen in Auckland where a prolonged industrial dispute has seen councillors taking partisan stands and where one of the most contentious issues in the Auckland Council’s Draft Spatial Plan was the proposed inclusion of a planned a 250m extension of reclamation by the port, since removed.

Revolutionary change – saving sectors

I have been involved in two sectors that underwent revolutionary changes to stay above water.  Both involved new players moving the ground from under conservative (and dominant) incumbents.

The New Zealand slaughtering and meat processing industry had to experience plant closures and company collapses to move from being a highly seasonal, over-capitalised, and non-viable industry to one that could compete internationally.  Long-standing work practises, fixed management thinking, and remote ownership prejudiced its ability to respond  to the trade upheavals that followed Britain’s move into the EEC in the 1970s.  It took new entrants with new ways of doing things to save it from crippling rigidities built on past success and current complacency.

In aviation, the beliefs of major western airlines that they were as streamlined and integrated as they could be and of  airlines in emerging nations that they could compete using the same management model but paying lower wages were turned over by a new breed of low cost carriers. Southwest pioneered the model in the US in the 1970s but it was not until the last 15 years that the LCC has really taken off. RyanAir and easyJet led the way in Europe in the 1990s. Air Asia has changed thinking about how airlines should operate in the developing world since then.  

These and their emulators re-invented the operational, management, and capital structures of aviation, forcing change on those traditional carriers that survived.  They have changed the way the public travels and have managed to restore a semblance of profitability to a sector in which that has been all too rare.

The Ports of Auckland Plan: back to the future?

The port industry in New Zealand may need a similar revolution.   I  looked for signs of revolutionary thinking in the POAL 2009 Development Plan.  All I could see is a commitment to more of the same.

The  analysis of future demand is central to any understanding of what the port expects to be doing, and how it might be doing it in the future. But there is no such analysis.  Instead, there is an extrapolation of TEU (20 foot container equivalent units) throughput and a conversion of this projection into capacity requirement.  A compounding 8% growth rate in TEUs handled from 1989 to 2007 was adjusted down to 5% as “a slightly more conservative long term growth rate” and used to project demand from 2008 to 2040.

This is anything but conservative   

When I looked at tonnage growth using the Statistics NZ Infoshare cargo figures from 1989 to 2010 I actually got a 4% growth rate, which raises a question over which figures to use.  However, anomalies in the historical figures fade into the background when we consider the impact of 5% compounding growth over thirty years: a four to five fold gain in container throughput. 

This raw projection begs a lot of questions about New Zealand’s changing trade profile.  That’s not the immediate subject of this blog.  Suffice to say, few commentators or policy makers are likely to see a fulfilling future as one built on exponential growth in trade volumes.

Ports of Auckland Vision for its Future

So why such a conservative response?

POAL does acknowledge uncertainty around the projections which inform its assessment of expansion options.  But none of the options canvassed (see pages 11 -13 in the Plan) envisage relocation of component trades or operations, although inland ports will no doubt play a significant role in the streamlining envisaged.  Instead a combination of progressive reclamation and new stacking operations is proposed.  The need to deal with larger vessels is also acknowledged in new berth design parameters and a channel deepening programme.  

No doubt efficiencies can be imposed at the margins through investment in new equipment and changing working conditions.  But what will this achieve in the long-term?  And how relevant will it be to New Zealand’s – and Auckland’s – economy in 2030 or 2040?

POAL is proposing to cement in a development plan  which imposes a singular and historical view of its place in New Zealand trade, and in the central Auckland cityscape.  If we are to go with Rob Campbell’s analysis, productivity will be diminished because a relatively low cost activity will be expanded over high cost (reclaimed) land. 

Its  hard to understand  how such a conservative approach to development can be founded on such a bullish vision of the future. Unless we actually suspend our belief in the projection, which seems like a sensible idea.

Time for a rethink

I’m not sure that this path is one that the country or the city can afford, at least not on such an apparently thin analysis of future demand. 

So it’s a wise move by the Council to omit the planned reclamation from Auckland’s Spatial Plan.  This is something that we need to think long and hard about.  We need to expand our thinking about the physical options facing trade in the northern North Island, for a start, rethink the role of the port in downtown Auckland, and perhaps heed the Productivity Commission’s advice regarding ownership and governance of the port industry.  

From Connection to Dispersal: Urbanisation in the 21st Century

Trade, transport and city growth

Commentators have long studied connections between cities and how these influence their development.  The city is the natural focus of trade-based theories of growth.  Exporting a surplus, based on local resources and specialisation was – and is – considered the way  to city wealth.

In this world, transport is the key to the trade portal.  The cities that dominated world trade in the 19^th and 20^th centuries were those best connected, initially through their ports and sea links complemented later through strong ties over the airways.  Mega-ports and airport hubs were  marks of city success. 

This blog raises the possibility that this model is changing, and we need to change our thinking about the future  of our cities with it.

Connectedness and concentration

Connectedness is a mantra for the new urbanists: through  international connection cities exploit the economies assumed to arise from ever-increasing concentration of people and business. Hence, the city seeking to make its mark globally must invest in ever increasing transport infrastructure.   Acknowledging the information age, it may add high-speed broadband to the mix and perhaps, in a symbolic move, an international convention centre.

But is this the right model for 21^st century urbanisation?

Aviation – moving on

Think for a moment about what has happened in aviation.  The last decade saw a quantum shift from a model whereby a few powerful hubs concentrated movement between a few major centres from which passengers and goods could, in turn, be distributed along local spokes – by regional aircraft, train, coach or car.  Airlines based themselves overwhelmingly at these hubs.  The large, twin isle jet reigned supreme.  The Airbus A380 is the latest conveyor of that model, but most likely the last.

Because late in the 20^th century there was a divergence between an ageing hub and spoke model and a growing model based on  dense networks connecting more and more cities directly. The single aisle, medium-haul jet took off.  And now the long-haul, highly efficient, medium-sized jet is further expanding this capacity to directly connect former spokes – smaller cities -- without the need to hub through major cities.

And all of this has been supported by the productivity leap brought about by the low cost airline model.  More people, more cities, more directly connected than ever before with the capacity to transform economic, political and social relations among them.  [1]

From transport to logistics

The transport sector was about moving goods from A to B as cost effectively as regulation allowed; and all too often regulation kept costs up to protect old technology and incumbent operators, whether by surface, air, or sea.  That, though, is changing as international transport is liberalised.    


And today transport is itself transforming into the business of logistics.  And logistics is about distribution – through a production chain, between producers and consumers, and among places.  Goods move seamlessly  through integrated operations that can deliver almost anything almost anywhere in a matter of days. 

An informational world

As the capacity to transport goods went up and the cost went down, academics trying to explain the differential growth of cities appealed to a new notion that dominating the exchange of information was the new key to prosperity.  Knowledge and expertise were concentrated in key informational hubs where they became the centres of capitalist power, the hearths of globalisation.  [2]

Well that’s changing, too.  Information and expertise is becoming dispersed, knowledge ubiquitous.  This is not just about the internet – although it obviously plays a huge part.  It’s also about the explosion of personal mobility as informational cities give way to an informational world.  (It may also be about the potential for implosion as a result of over-concentration, a threat still lingering in the financial centres of the world). 


Linked cities are giving way to networked communities.

From consolidation ...

The lesson?  Those of us involved in planning the city cannot assume the same structures will prevail in the future as those we inherited from the past.  We tend to plan, though, by looking for repeat patterns, seeking generalisation, extracting principles, predicting the unpredictable.  And because infrastructure – roads, rail, ports – are large scale, expensive, and enduring they become the bones around which we construct our futures. 

Infrastructure, particularly transport infrastructure, shapes our presumptions about how the city will function and the form it will take.  Hence, urban planning is preoccupied with how to consolidate  existing structures, increasing their capacity by building up rather than out and moving to mass transit, among other things.

... to dispersal

Yet the shifts in 21^st century logistics and information technology support dispersal.  And it might just be that dispersal is the key to 21^st century urbanisation.

Light rail systems, dedicated bus lanes, smaller, more fuel efficient vehicles, lower housing costs, more intimate localised but inter-connected sub-urban communities, common information and mobile expertise cutting across diverse tastes,experiences, and places  – these may be the way of the future.

In the developing world where urbanisation is most rapid they may be the only way.  Here dispersal is already the dominant reality.  While urbanisation may be exemplified in a few megacities in Asia, these account for only a small part of the total.  And even they are marked by rapid peripheral expansion, with distinctive, sprawling, dense and diverse communities on the edge.  Democraticised, localised self help institutions and NGOs may be the way to improved sanitation and health care in this environment, and micro-commerce the way to sustainable prosperity. 

And in the slower-growing cities of the west, the maturing of sub-urban life, a return to lifestyle-focused localism, ageing in place, and the growing importance of community-based care point to a future in which dispersal rather than concentration could be the dominant mode of social and spatial organisation.  Central structures may still have a role, but a diminishing one.

More generally we may have to think of cities themselves as comprising networks of connections, within and across boundaries.  The stronger these networks, perhaps, the  more resilient the city.  But this does not translate to physical density.  Proximity is not the issue. Well connected, dense networks will support, if not encourage, dispersal. 


This is contrary to the currently favoured model in places like my city of origin – Auckland – but it is not at all contrary to the centre within that city that I call home.

Getting it wrong

More than ever as we try to plan for the very long-term, we need to open our minds to alternatives.   You only need to look at the list of bankrupt airlines (or in and out of Chapter 11 in the US) to appreciate the consequences of overinvesting in the current model on the assumption that it will prevail indefinitely.

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[1]      See, for example, Centre for Asia Pacific Aviation (2003) Low Cost Airlines in Asia Pacific: A Force for Change
           and (2009) Global Low Cost Carrier Report

[2]     E.g. Castells M (1990) The Informational City: Economic Restructuring and Urban Development Blackwell;

          Sassen S (1991) The Global City, New York, London, Tokyo, Princeton University Press

Resurrecting the Sixties: Can We Restore High Street?

Can we regulate a return to the past?

The Chairman of Auckland Council's Business Advisory Panel, Cameron Brewer, is concerned about the impact of “shoebox shops” on the quality of Auckland’s Queen Street.  Queen St is considered the traditional heart of the city’s CBD.  Mr Brewer criticises the transformation of retailing going on there, and suggests mandating minimum shop sizes to counter it.

Waitemata Local Board member, Christopher Dempsey suggests that the city plan should provide for small, medium and large shops.  Ludo Campbell-Reid, the council urban design champion, is “determined to see the revival of the high street occur in Auckland”.

A revival may well be possible for Queen St, but it’s unlikely to see a return to the halcyon days of central city retailing.  Nostalgia is a slight foundation for planning the city centre’s much touted transformation.

Wanting it both ways

Anyway, it may just be that our planning has actually accentuated the changes we are seeing in land use on Queen Street.  And it’s hard to see how we can regulate to reverse that effect. 

The proliferation of small apartments on the western ridge of the CBD, the promotion of student accommodation to the east, big dollars spent on developing Queen Street’s footpaths have all helped create strip shopping to meet the needs and wants of the young and the restless.

And the rehabilitation of the harbour-side is playing its part.  New offices lining Fanshawe Street and the relocation of the ASB headquarters to the Wynyard precinct are signs of things to come. 

Take a lift in those older Queen Street buildings. The proliferation of shoebox offices is part of the changes to Queen Street as well. As the large corporates move out, or downsize (or otherwise disappear) subdivision of office space follows.  Don’t expect this to help retain the street level activity of the past.

The reality

The Queen Street canyon has had its day as a centre of employment and retailing even as the council promotes CBD fringe development (including transit-oriented developments planned to prop up an inter city rail loop).

Mind you, on the logic that new transport centres will reinvigorate areas Queen Street should have been given a boost by the redevelopment of the old Post Office site as a major inter-modal transport hub.  Yet even this major civic development has done little obvious to boost the fortunes of the Street, to lift its retail presence or increase employment. 

Catering for the Café culture

The irony is that the new Queen Street reflects the inner city café and restaurant culture so extolled by those who promote central city revitalisation: Queen Street from Mayoral Drive north looks and smells a bit like a glorified food court, a strip of fast food joints, where inner city residents and visitors can wander up and down and grow fat. 

This is simply a stand up variant of the more upmarket bars, cafes and restaurants found increasingly harbour-side, or on the Ponsonby and Parnell ridges.

Point of no return

These changes – progress --all act against a return to the high street of yesteryear.  So do more generic changes in retailing and consumption.  The productivity advantages of locating retailing closer to the consumer, in malls, neighbourhood centres, and reborn suburban strips; advances in production and logistics that underpin bulk retailing and now support direct sales through web-based channels; changes in what households consume; the greater frequency of shopping and eating out; and the declining share of employment in central cities – these all contribute to an increasingly diverse and dispersed retail milieu. 

And it is interesting that the greatest growth in eating out is happening in the suburbs, again covering the full range from take-outs through to fine dining.  (Some 82% of employment growth in  the food and beverage sector took place outside the CBD between 2001 and 2011).

It’s a long time since Queen Street was the Golden Mile of Auckland retailing (or eating).  The department and variety stores – with one notable exception – are long-gone. The record and book stores are yielding to web-based consumption, displaced by tourist trinkets and the increasingly ubiquitous 7/11.  In fact, over half the retail employment growth in the CBD as a whole was in food stores between 2001 and 2011. Reversing that tide would seem to be contrary to the idea that more people should live in the CBD. 

Shoebox retailing – a sign of the times?

No longer a retail destination, Queen Street is today a thoroughfare, a place where some people work, some shop, and most pass through.  It is no longer a shopping destination: the best the retailer can do is grab some small change from passers-by.  The most economic option under these circumstances may be shoebox retailing – that works in most cities with large inner city populations.  Quality retailing is almost invariably off-centre. 

So intensively subdividing ground floor retail space on Queen Street makes economic sense.  Requiring landlords to do otherwise by rules in plans doesn’t; and risks creating a central city wasteland of empty premises.

Playing to strengths

What should  prop up property values in the CBD generally will be ensuring that those places that are attractive continue to be so.  If that happens, a healthy CBD will spill over into Queen Street.

The best prospect for Auckland’s CBD may lie in the strategic re-orientation taking place east-west alongside the harbour rather than promoting outmoded views of the Queen Street canyon.  It means highlighting a few public spaces; and creating one or two quite exceptional precincts.  We gave had a go at the Ferry Terminal and Princess Wharf; at the Viaduct Basin; and now the Wynyard Quarter.  The Chancery Quarter – incidentally an incipient up-market fashion centre of international standing – and High Street also provide quality and quirky spaces of respite and character.

Realism rules

But we can overdo it.  Auckland is a city of just 1.5 million, and the vast majority of those people live much closer to suburban and sub-regional shopping centres than the CBD.  They can get to them easily, and combine trip purposes to save time and money.  The CBD is about entertainment, recreation and perhaps accessing specialist services: within the CBD Queen St is just a means of getting from A to B.  

Perhaps there’s not a lot that Mr Brewer, Mr Dempsey, Mr Ludo Campbell or even the Mayor can do to reverse current trends, especially as they already reflect city objectives and plans.  There’s no realistic way that we can regulate quality back into Queen Street. And we should not risk shifting scarce resources and limited expertise from those places that are working to try to redevelop those that we think aren’t. 

If we can lift just a few key parts of the CBD well beyond the ordinary, then we can expect Queen Street to prosper in its own way.  But don’t expect to go tripping down the High Street of the past.

Cities, Cars, People: is changing car use a function of new urbanism?

Thinking dense

One cornerstone for urban designers and planners seeking to transform the polycentric or suburban city of the 20^th Century into something resembling the high density city of the 19^th was a cross-city comparison by Newman and Kenworthy and successors. [1]  They argued that this proved automobile dependence is a function of city density.  It followed that regulating for greater residential densities and increasing the capacity of public transport systems to avoid the congestion that would follow if people continued to drive themselves would improve the sustainability of cities.

Of course, any comparison with the overcrowded and unhealthy cities of an earlier century is unfair: today’s density is achieved with higher standards of private and public space, and much enhanced transit and sanitation.  And many, probably the majority, of 21^st century citizens in high income nations can escape the confines of the urban environment on occasional sojourns to country or coast (or beyond), unlike their 19^th Century or developing world counterparts.  They can even find repose in the midst of 24/7 city hubbub in their own in-house media centres.

But can we really build urban policy on the Newman and Kenworthy analysis?  Especially given evidence that car use is declining anyway?

Questionable correlation

There are still questions over the original analysis and it successors.  Cross-cultural effects, physical geography, differences in economic structure, incomes, wealth, and growth all intervene in the relationship between city density and car dependence.  And cause and effect are hard to pin down. 

Perhaps more critical: the leap from observing relationships across cities at a point in time to regulating travel behaviour, housing ,and consumption choices into the future assumes that individual behaviour is a microcosm of collective behaviour. This fallacy of inference has long been recognised by the biological and sociological sciences.  And the likelihood of getting policy wrong by making such an assumption is far greater when dealing with populations of people, with their diverse circumstances, beliefs, values, and means, compared with, say, populations of penguins. 

Is it this blind spot that has made it so much more difficult to get people out of their cars or their low density houses than anticipated by urban reformists?

The city as a time warp

One problem is that analyses of city density and car dependence are usually static.  Plotting urban form and transport consumption at a particular point in time – the mid/late 20^th century in the Newman and Kenworthy case – embodies particular patterns of technology, wealth, and, behaviour.  Consequently, their urban prescription is based implicitly on the 9 to 5 work day; single city centres that focus urban employment, exchange, and consumption; and the nuclear family with its distinctive housing and service demands; all urban artifacts that have been breaking down since the 1960s.

But the times they are a-changing

In a 2011 paper the authors acknowledge that things are changing as international evidence shows rates of car use beginning to decline in parts of the world.  A partial view of what they are changing from, though, sustains a deterministic explanation of the why and what they are changing to:

“technological limits set by the inability of cars to continue causing urban sprawl within travel time budgets; the rapid growth in transit and re-urbanization which combine to cause exponential declines in car use; the reduction of car use by older people in cities and among younger people due to the emerging culture of urbanism and the growth in the price of fuel which underlies all the above factors”.[2]

The view remains time-bound; even the reference to exponential decline is a simplistic inference of the relationship between public transport and car use taken from a cross section of cities in 1995. 

Individual agency barely gets a mention.  Any description of an “emerging culture of urbanism” needs to be embedded in the reality of evolving patterns of wealth, income, and consumption and even in simple demographics to determine just how real and significant it is.

Growing old and driving more

What are the grounds for the claim that older people are reducing their car use, for example? I took a quick look at the evidence for New Zealand.  It is certainly not the case here.  The rate of growth in driving has been higher among older age groups than among younger – with decline most evident among the under 45s.  

Is it so different in the other ageing societies from which Newman and Kenworthy draw their examples?

Figure 1: Changes in Annual Driving Distance by Age, New Zealand 1990-2008

Fewer kilometres doesn’t mean less dependence

What does go a long way to explaining declining car travel in the aggregate is the fact that older people don’t drive as much younger people, and populations in western cities are simply getting older.  It’s simple maths – as the population ages car usage will go down, despite a greater propensity to drive among older cohorts. Again, look at the evidence from New Zealand:

Figure 2: Automobile Dependence by Age Group, New Zealand 2004-2008

Car usage appears to decline after age 44, rapidly after retirement age, 65. 

Why does car use fall with age?

There are a number of reasons why this may be so.  From 45 years on households have fewer transport-dependent children.  Mature families may have more localised social networks.  A greater share of recreation may be neighbourhood based.

On retirement work trips disappear and incomes, discretionary dollars and consumption fall.  The capacity for more shared travel and trip planning increases as households age.  Diminished car use doesn't necessarily mean that  households are less automobile dependent.  They just doesn’t generate as much travel demand.

These explanations don’t depend on particular urban designs.  Yet Newman and Kenworthy claim that diminished driving happens because “older people move back into cities from the suburbs”.  This is not consistent with the common observation of people’s preference to age in place.[3]  (For the New Zealand evidence, see my posting Ageing in the City).

Moving into the centre - a one-way street?
And their notion “the children growing up in the suburbs would begin flocking back into the cities rather than continuing the life of car dependence” rather simplifies a historically specific event: the transition of sons and daughters of the baby boomers from young adulthood, advanced education, and job seeking to the career and housing paths associated with their movement into more stable relationships.  As they age, it is highly likely that suburban preferences re-emerge, sustained by the capacity to purchase and operate a private vehicle.

Generation X boosted inner city dwelling over the past two decades, and Generation Y will do so, to a lesser extent, for another decade.  The 15 to 24 year age group also coincides with the age of greatest automobile independence (illustrated for New Zealand in Figure 3).  But don’t expect this historically-specific phenomenon to sustain some sort of indefinite culture of city consolidation, and I wouldn’t bet the fiscal bank on expensive transit systems designed around the assumption that it will. 

These are passing generations: their successors will be that much smaller and facing a somewhat different world.[4]

Figure 3: Use of non-Automotive Modes by Age Group, New Zealand 2004-2008

Who are we planning for?

Of course, there are plenty of exceptions to prove the rule: but that is the point.  Diverse communities have diverse expectations and behaviours.  And they are continuously changing, in composition, in form, and in behaviour. 

The failure of modernity lay in its assumption of conformity and convergence, compounded by the conceit that we could regulate for it.  And planning for what is little more than a statistical construct – the auto-independent city – risks blinding us to the richness and opportunity of alternatives, of lifestyle, of environmental stewardship, of urban design, and of mobility.

If we start with the behaviour of individuals and households our designs for sustainable cities may be less deterministic and our planning less didactic, better informed, lighter in touch, and a lot more effective in meeting the long-term needs of evolving urban communities.

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[1]           Newman, P and Kenworthy J (1989) Cities and Auto Dependency: A Sourcebook. Gower, Aldershot

                Newman, P and Kenworthy, J Sustainability and Cities: Overcoming Automobile Dependence, Island Press, Washington, D.C.

[2]        Newman P and Kenworthy J (2011) “‘Peak Car Use’: Understanding the Demise of Automobile Dependence”, World Policy Transport and Practice, 17, 2, 31-42

[3]        Pynoos R, Caraviello R, and Cicero C (2009) “Lifelong Housing: The Anchor in Aging-Friendly Communities”, Journal of the America Society on Aging, 33, 2, 26-32

[4]         For New Zealand, check the numbers

Can we do Bigger Better? Firm Size and the Quest for Productivity

Big enough to prosper

Look at this from the Economist:

Britons and Americans are used to lionisations of the small businessman. This praise is often misplaced; it is not so much small firms that drive growth and job creation so much as small and young firms on their way to becoming much larger. Where small firms are most common, as around Europe's southern periphery, their prevalence is sign of uncompetitive markets and low productivity.

The Economist suggests that the key to productivity is letting companies grow, because bigger companies deploy capital and labour more effectively.  We might add, from our remote New Zealand perspective, that size also gives firms the ability to work offshore markets, expanding beyond a constrained  domestic market.  

In this way, size begets size.  And big firms provide the seed bed for innovation (as I argued in Growing a productive urban economy) creating a virtuous cycle - at least up to a point. (For very large organisations there often comes a time when management diseconomies reverse efficiency gains).

What Role SMEs?

In New Zealand we extol the small and medium enterprise sector (SME) when maybe we should be doing what we can to get SMEs to bust out and grow.  And it’s fashionable to argue that if more were to locate within Auckland– our primary city - businesses could reap external economies of scale (so-called agglomeration economies), accessing more labour, more skills, and more services.   

But it’s more fundamental than that.  Rather than promoting lots of small business units sharing services and competing in a crowded labour market we really need to do what we can to ensure that more are actually growing.

The Size of New Zealand Business Units

The rest of this post looks at the size distribution of New Zealand business units using Statistics New Zealand February 2011 data. It then looks for evidence that location in Auckland might favour manufacturing by favouring bigger firms. 

The statistics tell us that 65% of New Zealand’ Geographic Business Units didn’t employ anyone.  (A GBU is defined by Statistics New Zealand as “a separate operating unit engaged in New Zealand in, or predominately one, kind of economic activity from a single physical location or base.) Let’s set them aside.

So what about the other 35%?  Well, the bad news is that New Zealand’s business units are underwhelmingly small.  63% of them provide 5 or fewer jobs, 78% fewer than ten! 

Looking at the other end of the spectrum, of 175,150 GBUs only 2,425 (1.4%) employed more than 100 people, and another 3,540 employed between 50 and 100 (2.0%).  Between them, though, these bigger units provided 44% of the country’s jobs.

The Analysis

I looked at the size distribution of business units for two “regions” – Auckland (New Zealand’s only city of over 1 million people) and the rest.  Auckland accounts for 29% of the country’s business units and 33% of its employment. 

I plotted the share of GBUs and employees across six size categories for Auckland and the rest of New Zealand.  The share of  business units in a given size category is plotted in the first two bars and the share of employment in the second two for each of the six size categories.  And in each case the share of the country’s units or employment outside Auckland (Rest of New Zealand) is plotted first ( in blue), to the left of the share inside Auckland (in red). 

So what does the data tell; us?  Business units in Auckland tend to be slightly larger. Even though over 75% still employ fewer than ten people (compared with 78% elsewhere) there is a marginal bias towards larger organisations, with 35% of Auckland jobs in units employing over 100 people compared with 31% for the rest of New Zealand.

This is consistent with the propensity of businesses in a dominant city to be larger, given a labour resource that can support greater expansion and a larger local market.

Digging Deeper

This exercise has been repeated for manufacturing, and within manufacturing for the dominant food processing sector (67,850 employees nationally) and for the next three sectors, equipment and machinery manufacturing (26,060 employees), metal products (21,650), and wood products (15,970). The charts appear at the end of this post.

Manufacturing

In manufacturing the picture changes.  The rest of New Zealand category has a greater proportion of both small and large enterprises than Auckland.  Consequently, only 32% of Auckland’s manufacturing employees are in firms with over 100 employees, compared with 42% elsewhere in the country.

Apparently the benefits of urban scale do not translate into larger manufacturing enterprises, at least at this level of generalisation.  This  raises doubts over the productivity of firms in the city,  and is consistent with my earlier evidence that concentration of a sector in  Auckland does not necessarily favour its growth .

Food Manufacturing

This anomaly is explained in part by the nature of the food products sector, which accounts for 36% of all manufacturing employment in New Zealand.  It is dominated by large dairy and meat processing works in rural areas, small towns, or provincial cities.  The nature of these long-standing and globally competitive primary processing activities mean that efficiencies accrue outside major urban centres in factories that tend to be labour, land, and capital intensive. 

Wood Products

Wood product manufacturing is much the same.  The 21% of New Zealand’s units located within Auckland tend towards medium size (10-50 employees).  Elsewhere in the country 27% of units of employ over 100 people.

So scale, expertise, and a commitment to exporting in primary processing mean that productivity in manufacturing may be healthiest outside  Auckland.  It is also reflected in a heavy commitment to exporting from  secondary centres.  Despite concerns that New Zealand food and wood processing do not produce a lot by way of highly transformed, high value products, sustaining and promoting their scale outside the main urban areas has been critical to their continued competitiveness.

Certainly Auckland (and Christchurch) plays an important role in these  industries, first through housing  higher order or specialised services they might draw on, including logistics, finance, legal services, and research; and, second, as a  location for smaller spin-off firms that undertake more specialised manufacturing and marketing using primary products as their raw materials.

The urban manufacturers

What about sectors that entail a greater degree of product transformation? Metal product and machinery manufacturing fit this description and are, by contrast with primary processing, urban activities.  In New Zealand, though, they are modest both in scale and performance. With a small number of notable exceptions there are few units capable of competing internationally.

Metal product manufacturing tends to take place mainly in medium-sized units, from 10 to 100 employees, particularly in Auckland, which dominates the sector.

The manufacture machinery and equipment has a higher proportion of very small units, and more employees in the small number of large units.  Again, Auckland accounts for a disproportionate share of national business units and employment.

The size distribution of units in these sectors, then, may be tied to the  scale of the  markets they are located  in – making them relatively poor prospects for productivity-driven international sales.  Their capacity to move beyond small scale is most likely limited.

So what does it mean?

If scale is a condition of productivity (and exporting), New Zealand industry faces a major disadvantage.  That’s hardly news.  So far, it has not achieved a lot by way of global performance outside primary processing sectors where scale and accumulated expertise build on a natural production advantage.  That’s not new, either. 

Making the point that in New Zealand size, innovation, and productivity happen outside Auckland is an important reminder, though, that much as we might want to pursue planning and policy fads based around urban agglomeration and density, that’s unlikely to offset our intrinsic disadvantages of small scale and remoteness. 

So what can we do?
According to the World Bank rankings New Zealand is already third in the world for ease of doing business.  Perhaps the answer is to ensure that it is also easy to grow a business here. 

Among other things, a policy fixation which promotes places as the fonts of productivity and innovation – and Auckland as the solution to boosting New Zealand’s economic standing -- may have to change.  The reality is that productivity is associated with organisations –  large and growing organisations, and their capacity to engage in networks ("production and distribution chains") of growing businesses.

The challenge for urban policy makers is to ensure that local conditions, the rules, regulations, and charges  affecting firms, and  the quality and availability of land, labour and capital  do not impede local investment and growth.  How this might be done should  be central to the Auckland Spatial Plan.  I see little evidence that it is.